Jörgen Lindegaard is determined to reverse the fortunes of struggling Scandinavian carrier SAS

Scandinavian Airlines (SAS) reported operating losses of SKr1.1 billion ($114 million) last year, but Danish chief executive Jörgen Lindegaard believes he can turn the airline around by the time next year's summer schedules start in late March.

The airline's future depends on cutting overall costs by 25% and significantly raising productivity of aircraft daily utilisation and pilot flying hours. "Our pilots are flying the fewest hours of any airline in Europe," says Lindegaard, as a result of "a combination of almost everything - pilot contracts, poor scheduling and so on".

SAS must wring contract concessions from its aircrew if plans to regain profitability, launch new routes and buy a regional-jet fleet are to succeed, says Lindegaard, who recently took over as "effective operations head" of the airline, in addition to his post as group chief executive. As well as renegotiating crew contracts, SAS will cut administrative costs by 35-40% and increase internet ticket sales to 25% from the present minimal levels.

A revised 2002 winter schedule announced earlier this year "will definitely increase productivity. We are just flying to the same destinations with fewer aircraft. The winter programme is the bottom, hopefully, with fewer aircraft and a small reduction in ASKs [available seat kilometres].

"We will add more routes in summer 2003, provided we get our costs down and new labour contracts. We will grow by redeploying aircraft we have taken out and reopening old routes."

SAS's established fleet and order programme will cover the reopening of old routes - the carrier's Boeing 767-300ER fleet is being replaced by Airbus A340-300s, with greater capacity and range, while the SAS Commuter subsidiary will soon ditch its last Fokker 50 turboprops, completing the switch to a Bombardier Dash 8 Q400 fleet.

Although the Q400s have given SAS "one problem after another", says Lindegaard, "we have takenall the trouble of introducing Q400s, and so we would hope to use them for years. And we are getting better service [from Bombardier]." Head of network planning Ole Orver says the airline's 72-aircraft Boeing MD-80/90 fleet "could be next to go".

But new routes will need additional aircraft. Lindegaard has three areas in mind: intercontinental destinations, southern Europe and new regional jet routes. Hong Kong and San Francisco will be the next long-haul destinations, as they have business links with the Scandinavian countries, with SAS planning to buy or lease more widebodies - probably A330s or A340s - to serve the new routes.

Any more destinations will bein already-served countries, involving partner airlines to connect them - the domestic leg of Stockholm-Hong Kong-Beijing for example, would be served by a Chinese Star Alliance member airline. "We have increased our intercontinental market share," says Lindegaard, "but SAS continues to have the lowest market share on intercontinental service. We plan to expand by introducing these new services."

As for yield, he says: "Of course we have reduced fares - we all have - probably we all dropped fares too much and now we are struggling to get them back again."

SAS plans to expand into southern Europe, with new routes to Athens, Lisbon and Rome. "These destinations will be leisure not business - provided we can make cost reductions," says Lindegaard. But SAS will have to avoid competition with its own daughter airlines, such as Spanair, which already operate the same routes.

The transition to larger A330 and A340 aircraft and the possible purchase of large regional jets will mean a change in emphasis for SAS, which has historically focused on the business market.

"SAS is too dependent on business class, because our cost base is too high," Lindegaard says. "We will still base things on the business traveller, but with bigger aircraft we need more leisure traffic to fill them."

Efforts to increase productivity, in part by making reductions in turnaround times, may be crippled by possible new European security regulations. Still under discussion, these would mandate aircraft searches at the start of each day and at the end of every sector, adding 10min to turnaround times. "It will harm our bottom line," Lindegaard acknowledges. "We tend to think it is unfair, but we cannot go out and claim we would not live up to any particular security measure.

"We fear we will have to bear all the costs, also the pain in the neck for our passengers. We would lose passengers who will use other means of travel."

But, in the end, SAS can do little about it. "We can discuss and protest and try to persuade, but in the end it is up to the politicians," says Lindegaard.


Source: Flight International